Post by Trade facilitator on Nov 2, 2013 14:23:39 GMT 1
Banning cocoa beans exportation ’ll be counter productive-Oginni, Cocoa Association chairman
Prince Oluwole Oginni is the Chairman, Lagos State chapter of Cocoa Association of Nigeria (CAN). In this interview with YINKA OLADOYINBO, Oginni, who is also the leader of cocoa exporters in Nigeria, highlights the potentials of the cocoa industry and the investment opportunities available therein.
How would you rate the contributions of cocoa to the economy of the nation?
Nigeria is the fourth leading exporter of cocoa in the world, after Cote d’Ivoire, Indonesia and Ghana. Cocoa export is the main agricultural export. Cocoa is the next biggest foreign exchange earner aside from oil. It is currently the most important agricultural export in Nigeria. Prior to the oil boom era in Nigeria, cocoa, cotton, groundnut, oil palm produce and rubber were the principal export commodities. With export re-orientation, only cocoa remained of any importance after 1975. With assistance from the World Bank, the government restored cocoa production in the late 1970s and 1980s through replanting programmes and producer price supports. As such in 2009 for example, cocoa beans export was $599 million, cocoa butter export was $57.4 million while cocoa powder and cake export was $8.4 million making a total of $664.8 million. You will recall that a few decades back, revenue from cocoa export was used to finance some of the regions.
Cocoa is of paramount importance to Nigeria. Our economy relied heavily on cocoa for foreign exchange in the past until the discovery of oil. Millions of families earn their living by growing cocoa on farms with an average area of between four and five hectares and the proceed is crucial to the farmers and their families.
Cocoa from Nigeria has gone through a period of decline in recent years, in terms of both quality and quantity. Under pressure from the International Monetary Fund (IMF) and the World Bank, the government was forced to dismantle the cocoa board in 1986. The abrupt liberalisation led to chaos and reduced quality. Structural adjustment policies have resulted into market liberalisation, resulting from the abolition of commodity boards, the introduction of free market policies, and the fluctuation in local cocoa prices.
Nigeria was the first African country to liberalise cocoa trade. Following the World Bank indication that agricultural marketing boards in the country were ineffective, and the suggestion to liberalise agriculture following to the liberalisation of foreign exchange, the Nigerian government unilaterally abolished marketing boards.
Main trading partners importing cocoa beans from Nigeria are European Union countries. Among all, The Netherlands holds the biggest share of quantity imported from Nigeria between 2005 and 2010, with an average of 30 percent of total quantity exported during those years. With 13 per cent and 12 per cent respectively of share Belgium and France follow the Netherlands, while the UK and USA both imported 5 per cent of cocoa beans from Nigeria during the same timeframe.
Cocoa Association of Nigeria has since 1986 been the private sector partner to government as it galvanises support for all government policies in the cocoa industry and links up with the international cocoa market wherever necessary.
Without doubt, cocoa contributes a huge amount to the nation’s economy. All you need to look to convince you is to take a trip to a cocoa producing community like Idanre in Ondo State or Ikom in Cross River State or Ilesa in Osun State. What you will notice in these communities is that the quality of life is much better, especially during the main crop season. Cocoa producing states too are much safer than other states. You can check your crime records and you will agree with me.
With recent awareness on the health and nutritional use of cocoa, (which is given promoted and supported by CAN, there is a new upsurge in cocoa consumption locally. This helps in the health and wealth creation ability of Nigerians and contributes significantly to the nation’s economy.
So, bottom line is: cocoa income makes the country safer in a way that even oil income does not, because more people are actively and positively involved in the cocoa value chain.
There has been a clamour for the return of cocoa board into the sector, do you think there is any justification for this?
The marketing board was set up to serve as intermediary between the farmers and the international market. The board was expected to stabilise prices paid to the producers, ensure public access and control over foreign exchange. During this period, there were other factors that influenced cocoa production, marketing and price received by cocoa farmers. These include: bureaucratic problems associated with commodity boards. With the coming of oil, people decided to abandon cocoa. With the coming of private entrepreneurs like us, the sector is picking up. There is a collective effort to revive the industry. Some states are trying to provide agric loans to support cocoa farmers to do cocoa plantation. Banks such as Bank of Agriculture and Bank of Industry are giving facilities to businesses to carry out cocoa production.
We buy cocoa beans from traders and sell to chocolate manufacturers as well as to other industries. There has been increased demand for certified cocoa products, especially chocolate, leading to increased market opportunities. We ensure quality control processes that are important to large industry players to use our cocoa beans in their chocolate products.
Any cocoa corporation or board that would come on stream now should promote quality and ensure fairness in the cocoa value chain. It must work with CAN to promote cocoa in all its ramifications locally and on the global scene.
How do you respond to the call for ban on export of cocoa bean?
Some people are advocating ban on cocoa beans. There is no justification for it. The government has initiated a programme to encourage the production of cocoa. We have invested in the business and the production level is such that the present processors cannot exhaust 10 per cent of it locally. They don’t have the local processing capacity. They don’t have the technical capability to carry out standard processing. Some of the processing companies are operating at a loss. So if the exporters are breaking even, they are equally generating employment.
Banning export of the beans will throw a lot of Nigeria out of work and shut down companies. The local value-addition efforts are not acceptable to international companies because of the quality of local processing and of the processing facilities.
Export ban will put the cocoa market in turmoil. As a major cocoa exporting company, we accounts for the bulk of cocoa bean and product exports. As an Association, CAN promotes healthy and overall growth of the entire value chain, without neglecting or hurting one part.
Higher cocoa prices, as you see today because of the value chain as it is presently constituted, equates to greater incentive for cocoa farmers, leading to greater production and improvement in livelihood.
We have come along this road before and the results took several years to pan out. The industry was severely hurt and it took CAN and cocoa exporters to rebuild the confidence of the industry. As the last time, this campaign is being promoted for purely selfish interests. The advocates have access to the media and have some connections with policy makers. They want to use these channels to stampede the country on a road that will rubbish all the progress made so far and return us to dark days.
You will see that no section of the cocoa value chain is behind this reckless campaign. That sends a message: that the distortion being promoted will not do us any good.
Where in the world is cocoa bean export banned because of local processing? Check out all producing countries - from Cote d’Ivoire to Indonesia, Ghana to Brazil, Malaysia to Togo. Do we grind as much cocoa as Cote d’Ivoire or Ghana? Do we consume as much cocoa as Brazil or Indonesia? You must see in all of this that it is not patriotism that drives these individuals but sheer selfishness, and maybe a diversion strategy.
Don’t you think that we should be processing all the cocoa beans we produce in this country instead of exporting raw beans? Don’t we have the capacity to do so?
CAN supports value addition for improved national income. However, you don’t jump into value addition. There is a process to follow. One of them is not stopping or banning cocoa bean export. You know that there is systemic failure in infrastructure across the country. This has direct impact on cocoa processing, as it affects other sectors of the economy. What is not so obvious to outside observers is that the quality of cocoa products coming from our factories is mostly below international standards. You can check this out yourself. That is not to say that we should not promote local industries and improve on the standards. But the reality is that in order to promote a holistic improvement in the industry, you have got to grow the entire value chain side by side.
What must be borne in mind is that no one plucks cocoa pods and sends them to the market. There is a whole lot of processing that takes place at the farm gate and in warehouses before the beans are exported. Cocoa exporters actually add a lot of value to the beans before export. You see the activity going on in my warehouse now. We have installed driers, cleaners and other machines to prepare the beans for export. We employ many young men and women to do the work to support the machines. We spend millions of naira every week to promote the quality of Nigeria cocoa and this is what you see with other serious Nigeria cocoa exporters.
We really look forward to the time when we shall utilise the entire beans produced in Nigeria, if that ever happens. Remember, the target of government is to hit about 500,000 metric tonnes by 2015. Who will utilise this quantity locally? The cost of setting up a 10,000 metric tonnes capacity cocoa processing factory in the country is about N3 billion. The cost is huge and very few people are interested in investing in that area. So asking the government to discourage export of raw cocoa beans in order to protect Nigerian value addition and job creation is not realistic because we don’t have the capacity to process cocoa.
Consumers in Europe, America, Asia are very conscious about food safety. Farm-to-market transportation in Nigeria is difficult and often leads to quality issues in the value chain; so also are access to land and processing facilities, and funding for expensive inputs. These challenges have had an impact on cocoa quality.
Cocoa processors accuse you (cocoa exporters) of making it difficult for them to purchase beans to feed their mills, thereby causing them to lose money and pile up huge debts. How do you respond to that?
We agree with the fact that processors are facing significant challenges. The truth is that Nigeria lacks the capacity to process cocoa to meet international standards. The processing factories processing of cocoa beans into intermediary products such as nib, butter, liquor, cake and powder suffer as a result of low capacity utilisation arising from a number of factors including lack of finance, high production cost, low level of local consumption of cocoa products, poor industrial infrastructure, absence of viable small and medium scale enterprises to absorb part of the intermediate products.
Whereas local processing of cocoa would strengthen our position in the market, it also has a number of limitations. Not only does it require considerable know-how and adequate production levels, but it is also dependent on cocoa supply, which is seasonal in character.Also, processing cocoa is one thing, finding a customer for the processed cocoa is another.
From the above you can see that local cocoa exporters have no blame here; instead we provide a significant support for the market through paying good prices to farmers, providing quality inputs for improved production, providing training for cocoa certification and supporting farmers during times of financial stress. If these services and support are withdrawn for any reason, then prepare for another group of militants who will lose their jobs to poor policies.
Source: www.tribune.com.ng/news2013/index.php/en/component/k2/item/25308-banning-cocoa-beans-exportation-%E2%80%99ll-be-counter-productive-oginni,-cocoa-association-chairman.html
Prince Oluwole Oginni is the Chairman, Lagos State chapter of Cocoa Association of Nigeria (CAN). In this interview with YINKA OLADOYINBO, Oginni, who is also the leader of cocoa exporters in Nigeria, highlights the potentials of the cocoa industry and the investment opportunities available therein.
How would you rate the contributions of cocoa to the economy of the nation?
Nigeria is the fourth leading exporter of cocoa in the world, after Cote d’Ivoire, Indonesia and Ghana. Cocoa export is the main agricultural export. Cocoa is the next biggest foreign exchange earner aside from oil. It is currently the most important agricultural export in Nigeria. Prior to the oil boom era in Nigeria, cocoa, cotton, groundnut, oil palm produce and rubber were the principal export commodities. With export re-orientation, only cocoa remained of any importance after 1975. With assistance from the World Bank, the government restored cocoa production in the late 1970s and 1980s through replanting programmes and producer price supports. As such in 2009 for example, cocoa beans export was $599 million, cocoa butter export was $57.4 million while cocoa powder and cake export was $8.4 million making a total of $664.8 million. You will recall that a few decades back, revenue from cocoa export was used to finance some of the regions.
Cocoa is of paramount importance to Nigeria. Our economy relied heavily on cocoa for foreign exchange in the past until the discovery of oil. Millions of families earn their living by growing cocoa on farms with an average area of between four and five hectares and the proceed is crucial to the farmers and their families.
Cocoa from Nigeria has gone through a period of decline in recent years, in terms of both quality and quantity. Under pressure from the International Monetary Fund (IMF) and the World Bank, the government was forced to dismantle the cocoa board in 1986. The abrupt liberalisation led to chaos and reduced quality. Structural adjustment policies have resulted into market liberalisation, resulting from the abolition of commodity boards, the introduction of free market policies, and the fluctuation in local cocoa prices.
Nigeria was the first African country to liberalise cocoa trade. Following the World Bank indication that agricultural marketing boards in the country were ineffective, and the suggestion to liberalise agriculture following to the liberalisation of foreign exchange, the Nigerian government unilaterally abolished marketing boards.
Main trading partners importing cocoa beans from Nigeria are European Union countries. Among all, The Netherlands holds the biggest share of quantity imported from Nigeria between 2005 and 2010, with an average of 30 percent of total quantity exported during those years. With 13 per cent and 12 per cent respectively of share Belgium and France follow the Netherlands, while the UK and USA both imported 5 per cent of cocoa beans from Nigeria during the same timeframe.
Cocoa Association of Nigeria has since 1986 been the private sector partner to government as it galvanises support for all government policies in the cocoa industry and links up with the international cocoa market wherever necessary.
Without doubt, cocoa contributes a huge amount to the nation’s economy. All you need to look to convince you is to take a trip to a cocoa producing community like Idanre in Ondo State or Ikom in Cross River State or Ilesa in Osun State. What you will notice in these communities is that the quality of life is much better, especially during the main crop season. Cocoa producing states too are much safer than other states. You can check your crime records and you will agree with me.
With recent awareness on the health and nutritional use of cocoa, (which is given promoted and supported by CAN, there is a new upsurge in cocoa consumption locally. This helps in the health and wealth creation ability of Nigerians and contributes significantly to the nation’s economy.
So, bottom line is: cocoa income makes the country safer in a way that even oil income does not, because more people are actively and positively involved in the cocoa value chain.
There has been a clamour for the return of cocoa board into the sector, do you think there is any justification for this?
The marketing board was set up to serve as intermediary between the farmers and the international market. The board was expected to stabilise prices paid to the producers, ensure public access and control over foreign exchange. During this period, there were other factors that influenced cocoa production, marketing and price received by cocoa farmers. These include: bureaucratic problems associated with commodity boards. With the coming of oil, people decided to abandon cocoa. With the coming of private entrepreneurs like us, the sector is picking up. There is a collective effort to revive the industry. Some states are trying to provide agric loans to support cocoa farmers to do cocoa plantation. Banks such as Bank of Agriculture and Bank of Industry are giving facilities to businesses to carry out cocoa production.
We buy cocoa beans from traders and sell to chocolate manufacturers as well as to other industries. There has been increased demand for certified cocoa products, especially chocolate, leading to increased market opportunities. We ensure quality control processes that are important to large industry players to use our cocoa beans in their chocolate products.
Any cocoa corporation or board that would come on stream now should promote quality and ensure fairness in the cocoa value chain. It must work with CAN to promote cocoa in all its ramifications locally and on the global scene.
How do you respond to the call for ban on export of cocoa bean?
Some people are advocating ban on cocoa beans. There is no justification for it. The government has initiated a programme to encourage the production of cocoa. We have invested in the business and the production level is such that the present processors cannot exhaust 10 per cent of it locally. They don’t have the local processing capacity. They don’t have the technical capability to carry out standard processing. Some of the processing companies are operating at a loss. So if the exporters are breaking even, they are equally generating employment.
Banning export of the beans will throw a lot of Nigeria out of work and shut down companies. The local value-addition efforts are not acceptable to international companies because of the quality of local processing and of the processing facilities.
Export ban will put the cocoa market in turmoil. As a major cocoa exporting company, we accounts for the bulk of cocoa bean and product exports. As an Association, CAN promotes healthy and overall growth of the entire value chain, without neglecting or hurting one part.
Higher cocoa prices, as you see today because of the value chain as it is presently constituted, equates to greater incentive for cocoa farmers, leading to greater production and improvement in livelihood.
We have come along this road before and the results took several years to pan out. The industry was severely hurt and it took CAN and cocoa exporters to rebuild the confidence of the industry. As the last time, this campaign is being promoted for purely selfish interests. The advocates have access to the media and have some connections with policy makers. They want to use these channels to stampede the country on a road that will rubbish all the progress made so far and return us to dark days.
You will see that no section of the cocoa value chain is behind this reckless campaign. That sends a message: that the distortion being promoted will not do us any good.
Where in the world is cocoa bean export banned because of local processing? Check out all producing countries - from Cote d’Ivoire to Indonesia, Ghana to Brazil, Malaysia to Togo. Do we grind as much cocoa as Cote d’Ivoire or Ghana? Do we consume as much cocoa as Brazil or Indonesia? You must see in all of this that it is not patriotism that drives these individuals but sheer selfishness, and maybe a diversion strategy.
Don’t you think that we should be processing all the cocoa beans we produce in this country instead of exporting raw beans? Don’t we have the capacity to do so?
CAN supports value addition for improved national income. However, you don’t jump into value addition. There is a process to follow. One of them is not stopping or banning cocoa bean export. You know that there is systemic failure in infrastructure across the country. This has direct impact on cocoa processing, as it affects other sectors of the economy. What is not so obvious to outside observers is that the quality of cocoa products coming from our factories is mostly below international standards. You can check this out yourself. That is not to say that we should not promote local industries and improve on the standards. But the reality is that in order to promote a holistic improvement in the industry, you have got to grow the entire value chain side by side.
What must be borne in mind is that no one plucks cocoa pods and sends them to the market. There is a whole lot of processing that takes place at the farm gate and in warehouses before the beans are exported. Cocoa exporters actually add a lot of value to the beans before export. You see the activity going on in my warehouse now. We have installed driers, cleaners and other machines to prepare the beans for export. We employ many young men and women to do the work to support the machines. We spend millions of naira every week to promote the quality of Nigeria cocoa and this is what you see with other serious Nigeria cocoa exporters.
We really look forward to the time when we shall utilise the entire beans produced in Nigeria, if that ever happens. Remember, the target of government is to hit about 500,000 metric tonnes by 2015. Who will utilise this quantity locally? The cost of setting up a 10,000 metric tonnes capacity cocoa processing factory in the country is about N3 billion. The cost is huge and very few people are interested in investing in that area. So asking the government to discourage export of raw cocoa beans in order to protect Nigerian value addition and job creation is not realistic because we don’t have the capacity to process cocoa.
Consumers in Europe, America, Asia are very conscious about food safety. Farm-to-market transportation in Nigeria is difficult and often leads to quality issues in the value chain; so also are access to land and processing facilities, and funding for expensive inputs. These challenges have had an impact on cocoa quality.
Cocoa processors accuse you (cocoa exporters) of making it difficult for them to purchase beans to feed their mills, thereby causing them to lose money and pile up huge debts. How do you respond to that?
We agree with the fact that processors are facing significant challenges. The truth is that Nigeria lacks the capacity to process cocoa to meet international standards. The processing factories processing of cocoa beans into intermediary products such as nib, butter, liquor, cake and powder suffer as a result of low capacity utilisation arising from a number of factors including lack of finance, high production cost, low level of local consumption of cocoa products, poor industrial infrastructure, absence of viable small and medium scale enterprises to absorb part of the intermediate products.
Whereas local processing of cocoa would strengthen our position in the market, it also has a number of limitations. Not only does it require considerable know-how and adequate production levels, but it is also dependent on cocoa supply, which is seasonal in character.Also, processing cocoa is one thing, finding a customer for the processed cocoa is another.
From the above you can see that local cocoa exporters have no blame here; instead we provide a significant support for the market through paying good prices to farmers, providing quality inputs for improved production, providing training for cocoa certification and supporting farmers during times of financial stress. If these services and support are withdrawn for any reason, then prepare for another group of militants who will lose their jobs to poor policies.
Source: www.tribune.com.ng/news2013/index.php/en/component/k2/item/25308-banning-cocoa-beans-exportation-%E2%80%99ll-be-counter-productive-oginni,-cocoa-association-chairman.html
